Conspiracy Theory

by Belle Waring on September 24, 2015

The recent news about VW has made me question some pretty fundamental things. I think cheating on this scale required, not just massive amounts of fraud, but a massive amount of complicity. No one at a lower level in the organization would take on the risk of freelancing a scheme of this nature. The benefits coming to you would be attenuated, and the danger would be great. This means that (minimally, some) people at the very top of the organization had to know about the software. Software powerful enough to determine when the car was being tested is complex and requires input from many sensors. This means (minimally, not a small number of) people had to know about the software. The person writing the proprietary code governing the steering wheel’s performance would have to be involved at least enough to have been told, “create an alert when the wheel hasn’t been moved in 2 minutes but the engine is running hard.” But it has always been my belief that, by and large, complex, dangerous conspiracies involving many people simply don’t happen. The more danger attaches to a criminal conspiracy—and here the danger seems in the worst case scenario actual dissolution of the company—the more the conspirators must be benefiting. Why would they do it otherwise? So, price-rigging among a small number of cartel members, for example, is easy to understand. But the larger the number of people involved in the conspiracy becomes, so, too does the benefit incline to decrease, but more obviously, the likelier it is that someone will screw up. If you are the director for a certain division of engines you might get a bonus that rises and falls with sales, or with the time and ease with which you meet projected goals. But it will have to be a pretty damn good bonus to risk being put in jail, right? And on the second point, each new person who knows about the conspiracy seems to exponentially increase the odds someone will blow the whistle. And yet here no one talked. They were only discovered by a pro-diesel group who wanted to tout the idea of getting more diesel cars on the road in the interests of cleaner energy expenditure! What the hell? And, do we think everyone else’s proprietary software is soft and rotten and fretted by maggots beneath a smooth and impenetrable DCMA surface? One can only imagine the EPA will be having a look…

{ 155 comments }

1

casmilus 09.24.15 at 10:29 am

Is it possible this was some sort of simulation/development code that got left in by mistake? No, I don’t think so either, but I wondered if they’d tried that as an excuse.

Maybe it’s the truth, but they’re too embarrassed to admit it, for damage to the image of German technical competence?

2

Warren Terra 09.24.15 at 10:35 am

In the coverage of the VW debacle I’ve seen it mentioned several times that a manufacturer of heavy trucks was caught having rigged their trucks so they’d relax emission controls and pollute more the longer the engine had been on – a simpler, if less effective, method of beating standard emissions testing, going back the best part of two decades (see here, for example). But this doesn’t seem to have made nearly so much news when it was discovered. Now, obviously, the scale of VW’s offenses is greater, the effort to deceive was of a whole larger magnitude, and VW is a consumer brand we all encounter and perhaps consider purchasing. Still, I can’t help but think that a more apocalyptic response to the exposure of that malfeasance with the trucks might have given the tricksters at VW a moment’s pause. Apparently last time such a scheme the several companies involved only had to pay costs (admittedly a billion) plus a mere $80 million in penalties.

3

Metatone 09.24.15 at 10:37 am

I think you overestimate the number of people that needed to be involved.
This could all be done inside the engine management software team.

It would only take one senior manager to have the idea and get them working on it.
Someone probably sold the idea to the workers with a flawed logic like:
“The test is artificial and it’s putting our cars at a disadvantage. We think the competition are getting around it by doing something like this. So we should too.”

There was a whole spate of similar incidents with graphics cards and CPUs having special modes when they detected standardised tests.

There’s something toxic about the software developer mentality that leads to this kind of “optimisation.”

4

rm 09.24.15 at 10:38 am

We rigged our cars to cheat the test by mistake. Whoops.

Now I’m ready to believe the voting machines are rigged. And stuff we now know the NSA does routinely to spy on us was, a few years ago we heard was technically impossible or very unlikely. Just because we aren’t paranoid doesn’t mean they’re not out to get us.

5

Fiddlin Bill 09.24.15 at 10:49 am

How many people were in on the JFK assassination? Or rather, how many people were in on the Oswald assassination?

6

Alex R 09.24.15 at 10:51 am

I’ve had many of the same questions you have. The biggest in my mind is: Really, no whistleblowers? In 7+ years?
Here’s what I’m thinking: I think knowledge of the cheat was probably limited to within a relatively small part of the organization — some senior engineering and regulatory compliance executives, maybe, and some engineers that implemented the thing. My image is Captain Kirk telling Scotty to make the emissions controls work, and this time Scotty was telling the truth when he said “I canna do it” but that bastard Kirk wanted him to do it anyway and Scotty found another way to make the Captain happy for now… Blowing the whistle in this situation would mean that you were revealing not only your bosses’ sins, but your own shameful incompetence…
(Disclaimer: I own a 2010 Jetta diesel, fwiw…)

7

Matthew Exon 09.24.15 at 10:56 am

Sounds like the theory described in this post applies:

http://crookedtimber.org/2015/05/26/libor-for-the-universities/

So “everyone cheats” gradually becomes something that everyone knows. It’s not a conspiracy because no-one has to work hard to keep the secret. The only people who would even understand a casually blabbed secret are other engineers already rendered cynical by a lifetime in the industry.

That is until one day some unfortunate bastard finds themselves under a spotlight having to explain the same thing to outsiders who don’t share the same cynicism, and suddenly it all looks very very bad.

Of course for this theory to work the problem must be endemic to the entire industry. Looking forward to seeing how that plays out over the next few months…

8

oldster 09.24.15 at 10:59 am

Right; this is the sort of conspiracy that I have generally thought, on a priori grounds, does not happen. Too many principals, too complex, too high likelihood of getting caught.

And I think that it will remain a good rule of thumb in the future to be highly skeptical of conspiracy theories in which a lot of people have to combine together with exquisite precision to pull off an elaborate plot. And more skeptical still when the pay-offs to individual players are likely to be relatively low.

(By contrast take, I don’t know, the Hunt Brothers silver-rigging scheme (https://en.wikipedia.org/wiki/Silver_Thursday): didn’t take many people to pull it off, and each of the brothers earned billions. That’s not an a priori unlikely conspiracy.)

But, yeah, this experience does force me to shift my credences a little, in the direction of being willing to consider that a given conspiracy theory may be true after all. I don’t like that.

9

Warren Terra 09.24.15 at 11:03 am

RE how many people were needed: I dunno, but maybe not all that many. The software that lets the engine be adjusted to beat the test is pretty legitimate – the whole point of this fancy computer-controlled engine is that the computer adjusts settings to balance performance, efficiency, and emissions, so adjusting to minimize emissions or to maximize performance are all part of its normal capabilities.

So, it comes down to a couple of things:
1) How hard is it to detect the emissions testing?
2) Given a software module that detects emissions testing, how many people would have to collude to install it, and to let it impose strong emissions controls (and, even more significantly, relax or abandon emissions controls the rest of the time)?

It seems to me remotely possible that a few senior software people could do (2) – though all the incentives suggest they would inform their bosses in the fancy suits what was going on.

10

AcademicLurker 09.24.15 at 11:12 am

I notice that VW has neither confirmed nor denied that Ahmed Mohamed was involved. Just sayin’.

11

Typhoon Jim 09.24.15 at 11:17 am

My experience with these things says that not only could a small team of maybe three people get away with something like this, I’m surprised that they didn’t play it off as a software bug or an artifact of using, say, code designed on a slightly different embedded platform not doing exactly what was expected when coupled with a new generation of hardware interfaces. Often things like this are written by a very small group and tested by that same very small group (which causes trouble when people leave or retire, as so much of what makes an embedded system smart ends up being locked up in a couple guys’ heads.)

If you weren’t specifically looking for something like this, you could get through a lot of testing cycles internally without seeing it. “Does this code actively defeat testing protocols” isn’t exactly something a VW engineer would be expecting to test for if they weren’t in on it.

12

nickj 09.24.15 at 11:19 am

I’m by no means an expert, but one possible story is:

we have to have a test mode because the front wheels are turning on the dyno and the back ones aren’t (this will confuse the braking computer).

the test mode is implemented with no fiddles.

test mode is made (if it isn’t already) the responsibility of a dedicated person or team.

test team can go off piste of their own volition, or at the behest of someone higher up the food chain.

IMO it would be possible for this to happen with only a few people knowing.

13

Cranky Observer 09.24.15 at 11:23 am

= = = But it has always been my belief that, by and large, complex, dangerous conspiracies involving many people simply don’t happen. The more danger attaches to a criminal conspiracy—and here the danger seems in the worst case scenario actual dissolution of the company—the more the conspirators must be benefiting. Why would they do it otherwise? = = =

While the logic and the first-order human behavior analysis in this statement are impeccable I am personally always brought up hard by the counter-example of Richard Cheney’s OVP. 40 people, only two of whose names and titles we ever learned, did something in that office for eight years. At the end of which time they spent 10 weeks shredding records at three locations and then disappeared into the night. Who were they, what did they do, what affect did they have on the direction of US policy and government actions? We do not know: none of them have talked, nor have any of the hundreds who must have interacted with them. I’m not sure how that situation fits with the theory in the OP.

But certainly in the private sector it is possible to keep things quiet for long periods of time [1]. Particularly in heavy industry there is typically a culture of us-vs-them, inside-vs-outsider that operates unwritten from top to bottom of an organization without any central control or prompting. If you’re not part of the team, if you don’t work at the plant, if you don’t wear the blue jacket we don’t talk to you period.

fn1: over 100 years in one case I observed.

14

ZM 09.24.15 at 11:23 am

It is a very bad scandal. Probably the company will not continue in my opinion. In Australian company law the law is that companies have to act conscionably, I didn’t know this except I went to a talk by His Hon. the Chief Justice earlier in the year and he said it was part of the Corporations Act. This law would be useful to invoke if any companies start trying to mine coal in the Galilee Basin again. You could also use it against smaller companies in my opinion, like the company that wants to build a big broiler farm here. The greenhouse gas emissions from the broiler farm would add to our Shire’s emissions 10% of the Shire’s emissions from gas and electricity — this is a high amount of greenhouse gas emissions to add on to our local government area, so I think it is unconscionable. Although of course on a much smaller scale than VW — but the broiler farm company is not a global company so of course it’s unconscionable actions are not going to be of the extent of a big global company’s.

15

oldster 09.24.15 at 11:23 am

“I’m surprised that they didn’t play it off as a software bug or an artifact”

Yeah, the line I hear most often when I am prosecuting undergrad plagiarists is, “that was an early draft–it was never intended to be submitted for the assignment! My final draft didn’t have any of that stuff in it, and I just attached the wrong file!”

It would have been easy to say something similar here–“it was an early version of the software! It was in beta-testing and somehow went wild! etc. etc.”

16

Cranky Observer 09.24.15 at 11:29 am

= = =It would have been easy to say something similar here–“it was an early version of the software! It was in beta-testing and somehow went wild! etc. etc.” = = =

Makes it a bit tough to get through the next ISO/CMMI/TLA-that-guarantees-lots-of-paperwork audit though. Not to mention all that self-certification paperwork that was submitted to the NHTSA, EPA, etc and their EU equivalents in lieu of on-site inspections by those agencies.

17

Trader Joe 09.24.15 at 11:51 am

I’d agree with Metatone @3 above, its probably a surprisingly small number of people. Software development for complex systems like engine management is surprisingly compartmentalized with teams of people working on particular modules within the broader suite of functionality. It could have just been a few people assigned to program ’emissions test’ software and they came up with a clever solution.

All of the sensors for data input and other hardware features were already present. The software was designed to interpret the data and basically “if x, then Y.”

I’d go on to assert that that it wouldn’t surprise me if very, very few people in senior management really had any idea aboutt this – by no means does this absolve them, but it strikes me more that the software folks came up with a solution that solved a problem. Management asked ‘is it fixed’ and they said yes – without necessarily providing all the detail. I admit to speculation here, but the hirearcy of these design systems is long on answers and short on details…its the same type of system that hides GMs inginition system problems for +8 years. Expect a lot more heads to roll before all is said and done.

Note also that the emission cheat really only mattered for beating US emission standards…it wasn’t needed for Europe since the engine already met those relatively more lax criteria without the need to cheat….perhaps those touting the clean-fuel chops of Germany and the EU would comment why this is so.

18

David 09.24.15 at 12:08 pm

I don’t think it’s necessarily helpful to think of this as a conspiracy. Genuine conspiracies are very rare, largely for reasons of logistics and psychology, and I don’t think this episode changes my mind about their rarity. This is something slightly different: a group of people covering up something for a long time. That’s more common, and has often happened on a very large scale. The best example I can think of was the wartime codebreaking work at Bletchley Park, which at its peak involved some 10,000 people, many of whom went to their graves never having said a word about it until it was officially admitted thirty years later.
Of course, this cause is infinitely less noble, and, as others have said, not many people actually needed to be involved in the actual detail. From my experience of organisations, what probably happened was that someone at the top level said “do something about this emission problem.” Down at level ten, or something, a few people come up with this tweak, their boss reluctantly approves it, and passes a sanitized version to the next level, which passes a sanitized version to the next level, and so on, until, by the time the top level hears about it, all they are told is “the problem’s been fixed”, which is what they wanted to hear.

19

Cranky Observer 09.24.15 at 12:10 pm

I would assume (hope?) that the chief architect of the engine program would go to sleep with his stoichiometry and trade off diagrams floating through his mind. When the firmware guys popped in and said they had a solution that violated the thermo and pchem models he asked no questions?

20

marcel proust 09.24.15 at 12:15 pm

No one at a lower level in the organization would take on the risk of freelancing a scheme of this nature. The benefits coming to you would be attenuated, and the danger would be great.

What danger? I think you are making a massive assumption about the society and economy that we live in.

No matter the offense, penalties have often been fleeting. Executives are not jailed; fines are manageable.

In the United States, automakers’ lobbying has ensured that the statute giving powers to the National Highway Traffic Safety Administration “has no specific criminal penalty for selling defective or noncompliant vehicles,” says Joan Claybrook, a former administrator of the agency and a longtime advocate of auto safety. There are no criminal penalties under laws applying to the E.P.A. for violations of motor vehicle clean air rules, though there is a division of the Justice Department devoted to violations of environmental law.

“I don’t see them changing this behavior unless criminal penalties are enacted into law that allow the prosecutor to put the executives in jail,” Ms. Claybrook said.

Enforcement outside the United States is rarer, and other major car markets, like Germany and Japan, tend to be protective of their domestic automakers. This year, the South Korean authorities claimed that Audi and Toyota had inflated fuel economy claims on two models — the Audi A6 sedan and the Toyota Prius gas-electric hybrid — by over 10 percent. The two automakers have denied the accusations.

21

marcel proust 09.24.15 at 12:17 pm

I tried the blockquote tag (probably a first for me) in the previous post and hoped that it would include my link. It didn’t. Here is the source of the blockquote.

22

marcel proust 09.24.15 at 12:18 pm

Great. Let me try that again: Here is the source of the blockquote. And in case the link does not work:

http://www.nytimes.com/2015/09/24/business/international/volkswagen-test-rigging-follows-a-long-auto-industry-pattern.html?_r=0

23

bianca steele 09.24.15 at 12:25 pm

It would only take some test code that someone later decided to enable in production. I don’t see how an engineering manager gets his or her team to implement regulation cheating software, and also gets the person responsible for emissions testing to go along. There are too many people involved and those groups probably don’t work together directly. Last minute, we can’t pass this test, let’s flip the switch, maybe.

24

oldster 09.24.15 at 12:32 pm

Cranky @19–

right–this is what makes me think a lot more people were in the know. They had to send out armies of people saying, “our engine delivers better performance and lower emissions than anyone else, and it doesn’t use the normal urea trick!” Of course at the level of the ad-copy people and the car-salesmen, they’re not going to give it a second thought–sure, our engineers are brilliant.

But there were a *lot* of people working on this car–its exhaust system, which is affected by the exhaust, its fuel system, every part of it, who had to think, “something doesn’t add up here.” And only some of them are going to buy the line that our engineers are brilliant.

Notice that another comforting myth is called into question by this episode: that the wonders of the free market will ensure that their competitors will keep them honest. Why did none of the other diesel-makers look at this and say, “I call shenanigans”? Engineers for Mercedes etc. must have looked askance at the claims being made. Why was the story not broken by them? Surely two firms would not collude, simply because they were all staffed by Germans? Unglaublich.

25

bianca steele 09.24.15 at 12:37 pm

To @9 I’d add 3) does VW do its own testing of the emissions system, which would have revealed that they met EU standards but no time US ones? That they don’t, I just don’t believe. That this tweak was done to meet a VW test by people with no idea of the legal implications, I can.

26

TM 09.24.15 at 12:38 pm

According to http://www.nytimes.com/2015/09/24/opinion/volkswagen-and-the-era-of-cheating-software.html, several other companies have been caught using similar cheating software.

In 1998, Ford was fined $7.8 million for using defeat devices that allowed its Econoline vans to reduce emissions to pass testing, and then to exceed pollution limits when driving at highway speeds. The same year, Honda paid $17.1 million in fines for deliberately disabling a “misfire” device that warned about excess emissions. In 1995, General Motors paid $11 million in fines for the “defeat devices” on some of its Cadillac cars, which secretly overrode the emissions control system at times. The largest penalty for defeat devices to date was an $83.4 million fine in 1998 on Caterpillar, Volvo, Renault and other manufacturers.

27

Barry 09.24.15 at 12:52 pm

oldster 09.24.15 at 12:32 pm

“right–this is what makes me think a lot more people were in the know. They had to send out armies of people saying, “our engine delivers better performance and lower emissions than anyone else, and it doesn’t use the normal urea trick!” Of course at the level of the ad-copy people and the car-salesmen, they’re not going to give it a second thought–sure, our engineers are brilliant.”

As I understand it, VW was claiming that they had some engine tech which did what nobody else could. If it was for some, but not all, engines in in VW vehicles, then the other engine program managers would have wanted that Right Now, and upper management would have wanted to roll that across the company.

28

bos 09.24.15 at 12:54 pm

Modern corporations seem to be be moving toward a model whre thete is a small number of core permanent employees together withe a large number of temporary staff.
Creates an environment where already there is an aeareness of who needs to know and who doesnt

29

Cranky Observer 09.24.15 at 12:57 pm

Keep in mind that the days of the engine swap or even the standalone engine management computer are gone. The entire package is an integrated unit controlled by integrated software. The headaches Boeing & Airbus have had with the 787 and A400 projects are larger in scale but provide public record of the difficulties such tightly integrated systems can have when one part of the software mis-functions. Heck, even the sound system designer needs to know how much noise she will get from the engine under condition x and is probably reading engine parameters to know that.

30

Iain Coleman 09.24.15 at 1:01 pm

Jimmy Savile got away with his crimes for his whole life, and lots of people knew about them. In his case, pressure on lower-level employees from institutions that benefited financially from Savile, and the threat of crippling lawsuits against whistleblowers, kept it all under wraps for decades.

If the incentives and disincentives are right, you can keep even very damaging information secret for a very long time.

31

Val 09.24.15 at 1:21 pm

Hi Belle, this isn’t on topic, sorry, but I heard some forensic stuff about war today, and the fact that 85% of those who die in wars now are civilians, and it made me think of your earlier posts about NPCs, which are a while ago now – so I wrote about it in my own blog. So thank you.

32

Val 09.24.15 at 1:25 pm

Re my @ 31 I have to apologise for that post a bit, it’s got some typos etc and due to glitches I can’t fix them for a few days.

33

oldster 09.24.15 at 1:31 pm

@26 and the excerpt from the NYT story on “cheating software”.

Now my eyes have been opened: the real culprit is excessive government regulation!

Why, these corporations were *forced* to fight back against the job-killing, heavy handed, socialistical mandates from Washington that were killing jobs, socialistically.

I mean, sure: maybe they broke the law. But it was pretty much entrapment.

34

Glen Tomkins 09.24.15 at 1:31 pm

No one knows what goes on inside a black box.

When the mechanics of vote tallying were still mechanical — boxes full of paper ballots, lever-pull devices, etc. — you did need a large conspiracy to steal elections. You basically needed the officials who counted the votes to be part of a political machine that also controlled the local police and judiciary. When the tallying is done out in the open, the number of votes that can be stolen is proportional to how many vote counters and law enforcers you can get in on pretending that obvious vote-stealing is not occurring.

Whether or not we have actually had any black box election theft in the Diebold era, having black boxes in the loop makes it possible to break the proportionality limit. If you can get malicious software into the tallying devices, their effects can be made opaque, so your conspiracy only requires people to write the hack, and people who can get the hack added to the instructions the black boxes implement.

For this VW fraud, all that the people in charge of VW would have needed would have been an outside group of hackers to modify the software that gets put into these vehicles. The conspiracy could be as small as one executive and one hacker.

35

jake the antisoshul soshulist 09.24.15 at 1:32 pm

VW hit the trifecta.

evil: We are going to lie to our customers in the US about engine performance for
short term financial gain.
stupid: They thought they would get away with it in perpetuum.
Crazy: it was irrational to endanger the future of the company for advantage in one part of their market.

36

Zb 09.24.15 at 1:40 pm

One implication of the scale of this conspiracy is that a lot of people ought to be prosecuted, not just the decision makers at the top. “I was only following orders” should not be a defense for corporate crime. If middle managers think that prosecution is a real possibility, it will make them think seriously about becoming whistleblowers.

37

Layman 09.24.15 at 1:43 pm

This seems to me like a symptom of contemporary corporate culture. Mortgage origination companies gave mortgages to the financial equivalent of dead people, and no one said anything. Investment banks bought those mortgages, which everyone knew were shitty, and no one said anything. They packaged them into shitty securities, and showed them to ratings agencies, who also knew they were turds, but pronounced them gold.

Many people at tech companies (Apple, say) must know the conditions under which their products are manufactured. Many people at energy companies know their pipelines are under maintained and leaking. Many people at mining companies know their tailings and sediment ponds, etc, are poisoning people. Many people knew the tires they made would fail at high speeds. Many people knew their peanut butter factory was infested with rats and the peanut butter itself comtaminated with salmonella. Most of these things, if not all of them, are crimes, yet no one says anything until the crimes are exposed, catastrophically.

As to why, it seems pretty clear. People at senior levels reap huge financial rewards by skirting the laws and regulations. Everyone else understands the personal cost of speaking up. That could come in the form of retaliation, but even that’s not necessary. If you speak up, and the company suffers, you probably lose your job anyway, along with a lot of other people. The crime drives the revenues and the profitability and therefore creates the jobs. No crime, less revenue, lower profits, fewer jobs. It is all financial incentive, though the incentive is more greed at the top and more fear at the bottom.

38

Layman 09.24.15 at 1:45 pm

jake @ 35

It appears they did it with cars in Europe, too.

39

ZM 09.24.15 at 1:48 pm

I was actually just looking at the U.S. conspiracy laws the other day. If it is a conspiracy the prosecutors do not have to determine who did what, they must just be able to charge the whole lot with conspiracy.

40

Layman 09.24.15 at 1:55 pm

David @ 18: ‘From my experience of organisations, what probably happened was that someone at the top level said “do something about this emission problem.”’

That part is as old as humanity. “Will no one rid me of this turbulent emission standard?”

41

bob mcmanus 09.24.15 at 2:12 pm

I haven’t trolled in like days. Weeks, even!

Conspiracy Art!

Learning From [Mark] Lombardi …best site I could find. Google image also.

Toscano on Lombardi, from Cartographies of the Absolute:

As Robert Hobbs notes, ‘Instead of simply solving crimes, Lombardi’s work often intensifies their mystery’.102 Lombardi’s rhizomes eschew any hierarchy of responsibility, and instead depict networks of sometimes only loose association, never coming together in a simple solution, some kind of cognitive or political epiphany. His ‘structures’ are painstakingly neat, their immediate visual effect is one of ordered complexity; but cognitively, and politically, they are nothing if not messy: ‘his brilliantly detailed drawings actually make things harder to understand, not easier. Looking at the endless miasma of names, institutions and locations, his charts are more about obfuscation than revelation … Lombardi’s drawings are like a pointillist work, best viewed from afar. From a distance you can see that a system has been revealed, but the closer you get to it the more invisible it becomes.

Even if endowed with a decent knowledge of the BCCI scandal or the networks in which Roberto Calvi or George Bush (I and II) operated, it would take a considerable investment of intellectual labour to make any ‘sense’ of the drawings, to specify their structure and project a coherent narrative onto them. No doubt, this was something that Lombardi was aware of when elaborating his practice. In that respect, the drawings are intentionally opaque. In later works, for instance, the viewer isn’t even provided with a legend to explain the difference between a solid line, a dotted line, and the squiggles that intervene in some of the lines of connection. Lombardi’s obsessive passion for inquiry is writ large, but it is also evident that he judged that the results of this research could not be presented with the kind of direct communicational economy endorsed by Tufte. Thus, as much as Lombardi’s work is about the actual conspiracies revealed by his drawings, it is also about the very gap – the perhaps unbridgeable gap – between lay viewers and the activities of, and collusion between, the ‘overworld’ and the ‘underworld’.

( You don’t even understand that you can’t understand.)

42

Watson Ladd 09.24.15 at 2:12 pm

EU has a rainier climate and no endoherric basins, so a higher level of particulate emissions is fine. US has the LA basin, and Salt Lake City which both have air quality problems caused by particulates.

43

Alex SL 09.24.15 at 2:15 pm

ZM,
It is a very bad scandal. Probably the company will not continue in my opinion.

I can hardly imagine such a big company disappearing in a puff of smoke. And if somebody were to wish for it, as a punishment, I’d say that is exactly the wrong way around. One of the fundamental problems of accountability in our current economies is that when fraud happens, a company often pays a fine amounting to somewhere south of 10% of the profits the fraud made possible while the people who did it rarely face any personal consequences*. Surely destroying the livelihood of thousands of innocent workers isn’t an improvement on that approach; quite the opposite.

*) Few things are more exasperating that seeing CEOs claim that the success of their companies is all down to their personal performance, but that they had no idea what any of their underlings were doing when something went bad.

44

R.Porrofatto 09.24.15 at 2:22 pm

The International Council on Clean Transportation performed tests that showed on average, on-road NOx emissions from the vehicles tested for this analysis were about seven times higher than the limits set by the Euro 6 standard. So I wouldn’t be surprised if other manufacturers are eventually revealed to have some sort of cheating mechanism at work.
At the same time, the VW revelation might have been discovered this coming year anyway: the real-driving emissions (RDE) test, which is scheduled to become a mandatory step for the type approval of passenger cars in the EU in January 2016. Under this new testing framework, diesel passenger cars will have to prove that they can keep NOx emissions at reasonably low levels during a test that more closely represents real-world driving situations.

The VW issue sounds like orders from above, fairly high up. The company wanted a way to keep the efficiency ratings marketable and competitive, and though I doubt anyone stood up at a meeting and wrote “Cheat!” on the whiteboard, I do think that the orders to fudge the test came from above, and the software engineers complied with their bosses’ request.

45

Bloix 09.24.15 at 2:35 pm

#24 – this. It’s a case of the dog that didn’t bark.

The problem of reducing NOx emissions to meet the 2007 EPA standards was so difficult that VW pulled its diesels of the US market. (NOx is a symbol meaning a combination of nitrogen oxide (NO) and nitrogen dioxide (NO2), which are pollutants that cause acid rain and smog and other bad things.)

Every other company that makes diesel passenger cars solves the problem with an exhaust treatment system that uses urea (ammonia plus carbon dioxide) to break the NOx down into harmless emissions – water and nitrogen gas.

VW claimed that its “clean diesel technology” didn’t produce the NOx in the first place, eliminating the next for the urea exhaust treatment process. This was cheaper and more fuel-efficient and required less maintenance. What VW was claiming was that it had invented an engine that burned diesel fuel differently from every other diesel engine in the world.

VW introduced its “clean diesel technology” in 2009. An effort to develop a non-NOx producing engine in two years would have been a huge project – hundreds of people in labs, offices, and testing facilities working round the clock.

Was there a project like this? If not, then every engineer and manager in the diesel engine department must have known that “clean diesel technology” was a con. And if so, then the engineers and managers must have known that it failed, so the con must have been even more obvious.

“Clean diesel” was marketed as a major breakthrough with huge implications for VW in terms of profits and image as a green company. There must have been many presentations at every management level, right up to the board of directors. What was the budget for it? And given the size that the budget should have been, wasn’t the board presented with progress reports? Wouldn’t the brilliant engineers and managers who brought this major breakthrough to fruition receive awards, bonuses and promotions?

But if none of this happened, it must have been obvious that something was wrong.

46

deiseach 09.24.15 at 2:36 pm

@Metatone

It would only take one senior manager to have the idea and get them working on it.
Someone probably sold the idea to the workers with a flawed logic like:
“The test is artificial and it’s putting our cars at a disadvantage. We think the competition are getting around it by doing something like this. So we should too.”

Also known as the Lance Armstrong defence. And given how long the various actors around Armstrong kept up the pretence for so many years, a plausible one.

47

ZM 09.24.15 at 2:37 pm

Alex SL,

an associate professor from uni wrote about the company in the paper and he did not think VW would continue, which is why I got the idea the company won’t continue

” There is a marketing word for the kind of trouble that VW is now in but I do not dare write it in this fine publication.”

There is no reason to keep the company, as we should be investing less in cars and more in public transport and active transport infrastructure, turning roads into linear parks and public spaces , and for necessary cars and trucks move to electric driverless vehicles – one expert said once we move to driverless vehicles we’ll only need about 30% of the current vehicles. If we improve public transport and active transport infrastructure then hopefully even less than than 30% will be needed, so streets will be much more pleasant being narrower and without exhaust fumes and too much traffic.

48

Plume 09.24.15 at 2:37 pm

There is no need for a conspiracy when it comes to these things. It’s all under the umbrella of “business as usual” and general corporate interests. All the incentives for our economic system — economic apartheid — push people, especially at the top, to take these risks in the name of profit. And, because corporations rule our governments, they expect — they take for granted — that they’ll get away with this.

(They almost always do.)

Regulatory capture. Contrary to the right-libertarian view that this is a problem with all governments, this is a problem with the economic system they love. Because the capturing is being done by that economic system. That system is doing the corrupting of public officials. A different kind of system wouldn’t do that. A different kind of economic system wouldn’t have all of the built in incentives to lie, cheat, steal, pay off, buy, bribe and capture government protection. Endlessly.

To me, the really baffling thing about all of this is that so many otherwise intelligent people can look at these scandals completely in isolation, one after the other, in endless succession, and still not understand that the economic system itself produces them. They’ll wrack their brains, over and over and over again, trying to find the answers in each individual case, and never, ever notice the 800 pound gorilla in the room:

It’s economic apartheid. It’s the capitalist system. It’s the scorpion and the frog.

49

Stephen 09.24.15 at 2:44 pm

Maybe someone who understands more about diesel engines than I do can answer a couple of sets of technical questions.

1) Diesel exhaust fluid, a solution of urea in water, has been widely available for some time. It can greatly reduce emissions of nitrogen oxides: it is sprayed into the exhaust gases, which then pass over a catalyst in which urea is converted to ammonia, which then reacts with the nitrogen oxides to form nitrogen and water. Presumably (yes I realise this may be a weak point, but is there any other interpretation?) the Volkswagen software ensured that a great deal of exhaust fluid was being sprayed in when the engine was being tested, and much less at other times. Question: what is the advantage, in terms of engine performance, of reducing the spray rate of exhaust fluid? I suppose there must be some advantage, else otherwise why would VW do it?

2) VW may have fudged the particulate emission rate as well – if they didn’t, the rate must be acceptably low even when unfudged, and if so is there any justification for worrying about particulate emissions? But particulates can’t be removed by urea treatment, you need a special filter. How would it be possible for VW to fudge that?

50

deiseach 09.24.15 at 2:44 pm

@Bloix

Really interesting post. Any thoughts on why no one in rest of the car industry didn’t try to hack apart a VW to see who those sausage-eating beer-swilling lederhosen-wearing fuckers managed to do it? Maybe they did and it just wasn’t news.

51

William Timberman 09.24.15 at 3:00 pm

Cheney to the world: Your silly international conventions change nothing. Schäuble to the Greek government: Your silly elections change nothing. Winterkorn to the EPA: Your silly regulations change nothing.

We may not like the implications, but it’s not as though we haven’t been warned.

52

William Berry 09.24.15 at 3:00 pm

David @18: “I don’t think it’s necessarily helpful to think of this as a conspiracy.”, et alia passim:

Depends on what you mean by “helpful”. More than one person had to know, and they intended to keep it a secret. That is a conspiracy by definition.

It can be helpful, in a general way, to consider something as what it actually is.

53

TM 09.24.15 at 3:03 pm

No Lederhosen in Wolfsburg. Btw, I’m surprised nobody mentioned this yet, VW is 20% state owned and the government (of Niedersachsen) is represented in the governing board.

54

Daragh 09.24.15 at 3:11 pm

“Cheney to the world: Your silly international conventions change nothing.”

I seem to remember a major international backlash against the Bush administration’s international bullying that left Washington rather isolated at the end of commander codpiece’s second term, and unable to secure major goals like NATO MAPs for Ukraine and Georgia, or scud-whipping Iran. It also obliged Obama to spend significant effort on rebuilding shattered relationships.

“Schäuble to the Greek government: Your silly elections change nothing.”

Indeed. The Greek elections did not magically result in Greek budget revenues suddenly exceeding expenditures, nor change the opinion of international lenders that it wasn’t a great idea to lend to Athens. While I think the fiscal austerity program demanded by the Troika has been incredibly stupid, I don’t see how the choices of the Greek electorate in any way, shape or form constitute a binding mandate on the government’s of its creditors. To put it more crudely – if the Greeks vote for more German money with fewer strings, it still isn’t ‘undemocratic’ if Berlin tells them to get suffed.

“Winterkorn to the EPA: Your silly regulations change nothing.”

Except, when the scandal was discovered Winterkorn was forced to resign, VW’s stock plummeted, and it seems likely that several executive will be sent to jail.

In other words, in the two cases of actual rule-breaking you’ve identified, there have been actual negative consequences for the rule-breaker.

55

Layman 09.24.15 at 3:14 pm

“In other words, in the two cases of actual rule-breaking you’ve identified, there have been actual negative consequences for the rule-breaker.”

What were the consequences for Cheney again? I missed that part.

56

Snarki, child of Loki 09.24.15 at 3:14 pm

@Stephen: the models that most obviously had the “emissions hack” did NOT have the urea injection.

It seems that the engine control software can be “optimized for power”, “optimized for gas mileage”, or “optimized for low emissions”, where the optimization has more to do with engine timing and fuel/air mix than anything else. So the ‘low emissions mode’ would include both NOx and particulates.

Why, in the old days you could do the same, with a timing light, messing with the carb jets and a couple hours under the hood. But now you can just tell the computer to switch modes, and away you go.

57

David 09.24.15 at 3:20 pm

@Willimam Berry. It might be more accurate to say that we don’t actually know that it’s a conspiracy because we don’t know how many people were involved and at what level. I know that in some contexts a conspiracy can be alleged between just two people (in criminal cases for example) but I think the point in the OP was rather different. We don’t know yet (though it seems unlikely) if this was large and organised enough to make us change our opinions about how far the kind of conspiracies featured in books and films actually exist in real life. Until there’s more evidence, I remain a firm believer in the cock-up theory.

58

Doctor Memory 09.24.15 at 3:21 pm

Belle: “If you are the director for a certain division of engines you might get a bonus that rises and falls with sales, or with the time and ease with which you meet projected goals. But it will have to be a pretty damn good bonus to risk being put in jail, right?”

The Dunning-Kreuger effect applies to criminals as much as anyone else, possibly more. Making the call you describe above requires a cold, dispassionate and above all accurate assessment of your risk of getting caught — it’s really no surprise that people get that one wrong all the time.

(Also, if most of the principles in the scheme were anywhere near retirement age, they may have very correctly gambled that there was little chance of criminal or civil liability attaching to them personally, and that they would be far removed from the scene by the time the bill for VW as an organization came due.)

59

Sebastian H 09.24.15 at 3:43 pm

Doctor Memory may have the right of it, especially if combined with the notion described in #7 by Exon (and earlier d-squared). It isn’t the same type of conspiracy if you believe that ‘everyone’ is cheating. Then you don’t feel you are really hiding anything. So long as whatever engineering unit you are working with all buys into the idea it isn’t really a conspiracy so much as a systemic corruption.

I definitely believe in systemic corruptions! (See banks, and banks, and the big financial companies).

We will hopefully know more as the investigations ramp up, but if this ends up being a large group of engineers and managers who really knew they were actively cheating, we may very well have to revise our ideas about what conspiracies can last.

60

Stephen 09.24.15 at 3:48 pm

Snarki@56: “the models that most obviously had the “emissions hack” did NOT have the urea injection”.

You may well be right. The trade press doesn’t seem to agree with you:
http://www.tflcar.com/2015/09/vw-tdi-dieselgate-scandal-affects-11-million-cars-vw-ceo-to-step-down-news/

“Basically, 11 million vehicles world-wide with the EA189 TDI turbo-diesel engine have the software that was shown to cheat the U.S EPA emissions tests … The EA189 TDI is the 2.0L four-cylinder engine which include the Selective Catalytic Reduction (SCR) technology.” SCR technology means urea injection/catalytic reaction.

Of course, it is possible that the EA189 combines both SCR technology that is not affected by the software fudge, and engine timing and fuel/air mix controls that are.

Anybody know?

61

Bloix 09.24.15 at 3:54 pm

#50 – good question. I have no idea. Also, where are the patents? There should have been patents for the “new technology” and patents are public record. Were there any?

62

Jake 09.24.15 at 3:55 pm

Based on everything I read, the VW engines in question only had a “lean nox trap” and did not have urea injection. Their newer diesel engines do have urea injection.

63

Stephen 09.24.15 at 4:48 pm

Jake@62: again, you may well be right. Sources, please.

64

Doug K 09.24.15 at 4:58 pm

Layman @37 is the right answer, to my mind. That, plus the fact that ‘everyone else is cheating on their emissions controls’ as per the NYT story: it’s not really a crime at all, or so at least all those involved can plausibly convince themselves.

For those at the lower levels,
“The benefits coming to you would be attenuated, and the danger would be great. “
Benefit: you get to keep your job.
Danger: you lose your job.
Seems roughly equivalent..

“do we think everyone else’s proprietary software is soft and rotten and fretted by maggots beneath a smooth and impenetrable DCMA surface?”
why yes, yes we do.. that is what software looks like, all software. Sometimes from malice aforethought as here, but more usually because software is hard.

65

Doctor Memory 09.24.15 at 5:11 pm

I will also concur with the various people above: the realities of modern software development not only makes it possible to pull off something like this with a small team of people inside a larger organization, it practically encourages it.

The ideal of large-scale software engineering is a system of loosely coupled black boxes: your team never looks at the code another team produces, you merely do integration tests of your code against the APIs they provide. Does their API produce syntactically correct output when your component provides input? Yay, your regression test passed and you can get on with your life. It’s hard enough having a deep understanding of your own segment of the system; if you had to be able to reason a priori about the structure of the entire thing (millions of lines of code, in turn running on top of millions of lines of other code, on top of a turtle, and turtles all the way down) you’d quit and become a yak farmer instead. Many of us do that anyway. It’s a weird business.

66

Daragh 09.24.15 at 5:15 pm

Layman – “What were the consequences for Cheney again? I missed that part.”

Fair point! I mean beside widespread public contempt for the man and his reduction to complete crank status, you’re right. His punishments have not been terribly severe. However, I was focusing on the consequences for the US in violating global conventions, not Cheney personally.

67

Ed 09.24.15 at 5:20 pm

“But it has always been my belief that, by and large, complex, dangerous conspiracies involving many people simply don’t happen.”

I skipped over the comments to post this, I’ll go back and read them later. I’m sure someone earlier has made the same point I’m going to make.

But Jesus Christ, this is ignorant. Its the sort of statement that makes me take everything else the blogger writes less seriously.

https://en.wikipedia.org/wiki/Manhattan_Project

https://en.wikipedia.org/wiki/Bletchley_Park

68

Ed 09.24.15 at 5:29 pm

“I can hardly imagine such a big company disappearing in a puff of smoke. “

Arthur Anderson, Enron, and Lehman Brothers did, but then the Bush Administration was serious about this stuff.

Volkswagen was created by the German government, and produced their equivalent of HMMVs during World War II, so in this case I don’t think they will disappear.

69

Ed 09.24.15 at 5:38 pm

At some point in these threads someone has to point out that the whole idea of “conspiracy theory” was created as part of a CIA directed propaganda campaign (the CIA is not supposed to conduct propaganda campaigns against the American public), when they started to get worried that people were asking too many questions about how involved LBJ and the CIA itself was with the the first Kennedy Assassination. Here is another link:

http://utpress.utexas.edu/index.php/books/dehcon

The book reprints the now declassified original memo behind this, which is well argued and makes for interesting reading.

However, before then, it just wasn’t considered to be particularly strange or controversial to suggest that powerful organizations might be acting from motives, or doing things outright, that they didn’t really want to become public knowledge.

70

BobbyV 09.24.15 at 5:40 pm

Diesel exhaust fluid (aka DEF) consumption rates were carefully calibrated to achieve a balance between meeting NOx emissions while maximizing the number of miles driven before a refill of the on-board DEF reservoir is required. DEF consumption rates were calculated based on the non-commercial, low load, infrequent towing drive cycles associated with commuting and recreational use. Under these conditions, the 5 to 6 gallons of DEF in the reservoir would carry the owner through the recommended oil change interval of 8K to 9K miles, at which point the servicing dealer would refill the DEF reservoir during scheduled oil changes. It was felt that requiring the owner to refill his or her own DEF tank would limit sales.

Not all OEMs opted for a DEF solution to the lower NOx limits. Some chose to modify their exhaust gas recirculation (EGR) algorithm to lower exhaust temperatures. Those OEMs that switched to a DEF solution, despite the increased hardware costs, did so as testing found that DEF injection resulted in a 5% to 8% improvement in fuel economy over EGR based solutions.

To meet EPA concerns with owners driving with empty DEF reservoirs, a series of messages/alarms alert drivers that vehicle performance will degrade in stages until the DEF reservoir is refilled. Ignoring these prompts eventually results in what the OEMs jokingly call “walk home mode,” as the on-board computer shuts the engine down.

71

Ed 09.24.15 at 5:42 pm

Sorry for the multiple posts at once. I forgot to point out that right after the news about Volkswagen came out, it was revealed that scientists at Exxon discovered that carbon emissions were causing global temperatures to rise in the 1970s. The company then started funding a campaign to convince people that there was no scientific proof that carbon emissions caused temperatures to rise:

http://insideclimatenews.org/search_documents?field_related_project=41124

I actually think this is bigger news than what Volkswagen was doing, though the cases are similar.

72

oldster 09.24.15 at 5:59 pm

Ed, if your examples of conspiracies that throve involve legal governmental activities supported by the full weight of the government, military, and secret services (augmented by the Official Secrets act in the case of Bletchley) then they may not provide such obvious counter-examples to the claims that the rest of us have been making.

And how long, exactly, did the Manhattan Project remain secret? About half the time that the VW hack remained secret?

Still, I do apologize for my ignorance.

73

Shirley 0401 09.24.15 at 5:59 pm

Layman @ 37
Thanks for saving me the time of writing a less-succinct version of that response.

I’m struck, reading this post and others on the topic, how we finally seem to be waking up to the fact that when case after case makes the news, the isolated incidents start to accumulate and cohere to tell an increasingly hard-to-deny narrative.
Despite how badly most of us seem to want to believe each revelation exposes the independent actions of a bad actor or two, rather than a problem with the system (i.e. the system encourages and rewards decisions and behaviors that we claim we want to discourage), it’s harder and harder to take this rationale seriously. I think there are a lot of smart people out there who realize that even the worst-case scenario for cheating is not much worse than the outcome they can expect from 100% compliance with regulations. Especially when losses are paid by the company, and NOBODY EVER GOES TO JAIL.
It doesn’t help, of course, that most major media outlets tend to report each case in isolation, and continue to portray managed settlements (for instance) as providing a reasonable degree of security that illegal behaviors won’t continue. Despite plenty of evidence that they do no such thing. How many times has Pfizer promised to always do everything right, no matter what, if we just give it another chance?
Personally, I’d like to provide everyone a basic income and remove protections for employees who are just following orders to keep the kids fed and clothed. Including the implicit one of knowing your coworkers all have food and clothes to afford, as well, and can also generally be counted on not to raise a fuss. In my admittedly-utopian daydream world, the result might be companies behaving ethically, in order that they can attract and retain talented people who expect to be able to not have to quit due to pressure to do illegal and/or unethical things. Unfortunately, I don’t have the means to provide everyone a basic income.)

74

Laie 09.24.15 at 6:45 pm

I’m by no means an insider, but close enough to hear the moaning. The first reaction was incredulity that this should turn out to be a big scandal.

The power supply in my PC is supposedly 80+% efficient, but only under a unrealistically high load. The EMC emissions of circuitry only look good in the specific wavelengths that are prescribed by law. With No Child Left Behind, I hear a lot about “teaching to the test”. Everybody’s playing to the rules, all the time.

Probably noone else has gone to such great lengths as VW (I really can’t imagine how anyone could take it any further than they did). But that’s a matter of degree. I’m pretty certain that the people involved didn’t think they were especially unethical.

PS: it’s uncanny to see another Layman.

75

Zamfir 09.24.15 at 7:12 pm

@Dr memory, it’s not the software side that makes the ‘small group of coders” theory unlikely. It’s the engine side, where hundreds to thousands of engineers struggle to increase performance, and know perfectly well that the engine can’t do what it is claimed to do. And that includes former engineers who became high level managers.

They might not know exactly what trick is used, but they know tricks are used. The surprise (if there is any) is not about the cheating, it’s that the cheating is so straightforward. If you asked, they would have guessed the cheating worked more subtle. React to the small band of rpms used in the test, acceleration profiles as used in the test, etc.

The competitors are denying cheating, and I bet this is what they mean. That their tricks are not as obvious cheating. And they know because they caused the department in charge of test-cheating, and asked what tricks they used. If you ask someone in engine development, whose in charge of fudging the tests, they can provide name and phone number.

76

Stephen 09.24.15 at 8:09 pm

ed@70: the first published work showing that carbon dioxide emissions from fossil fuels must tend to lead to an increase in temperature was by Arrhenius in 1896. See http://www.rsc.org/images/Arrhenius1896_tcm18-173546.pdf
How far these emissions have in fact led to an increase in global temperatures(as to some extent they must, if they do not oppose a decrease) was not, as far as I can see, “discovered [by scientists at Exxon]that carbon emissions were causing global temperatures to rise in the 1970s’; and the links you provide do not persuade me that this was so.
What all that has to do with VW’s delinquencies , I cannot say. can you?

77

Krebby 09.24.15 at 8:28 pm

Embedded developer here. I see a lot of uninformed speculation on this page about corporate conspiracy and culture of complicity. Metatone @ 3 and Terra @ 9 have the right answer. Controlling an engine requires complex code that seeks different goals at different times (performance, efficiency and emissions). For the developer, the problem is to guess what state is best to control for depending on the input of the driver, and they probably have a suite of tests against which they evaluate different control algorithms. To some extent, any test is artificial and it is not hard to see why a developer might view it as an arbitrary choice to force it to optimize emissions if, say, the engine is connected to a test harness.

78

Barry 09.24.15 at 8:41 pm

Zamfir 09.24.15 at 7:12 pm
“@Dr memory, it’s not the software side that makes the ‘small group of coders” theory unlikely. It’s the engine side, where hundreds to thousands of engineers struggle to increase performance, and know perfectly well that the engine can’t do what it is claimed to do. And that includes former engineers who became high level managers.”

From my understanding, VW was basically claiming to do what nobody else could.

79

montag47 09.24.15 at 8:45 pm

So much of this comes down to penny-pinching. It was always a horror in the car manufacturing business (think of the decades of Chevrolets–trucks, especially–with brake, tail and turn signal feedback because Chevrolet redesigned the electricals to save fifty cents a unit, or Sir William Lyons, when the first XK-E was being costed out, choosing standard brake linings over premium to save 25p per unit on a 150mph luxury car), and the power generation business makes car manufacturers look like pikers, and the food industry makes the power generation business look like amateurs.

My guess is that this may be a combination of not meeting advertised mileage figures without the kluge, or perhaps having to pay more for full-time emissions equipment, but I’m reasonably sure it comes down to lost Euros per unit, whether in component costs or losses through marketing.

As for how to do it–dead simple. Not all emissions testing is done just by the EPA on rolling roads, and not all stations in the states use dynamometer testing (very expensive equipment), so I don’t think the front wheels turning/rear wheels not turning would be foolproof. The simplest way would be to detect that the OBD-II port was in use, which is standard practice in all air quality stations in the U.S. Plugging in the test connector could just swap to a different parameter map. Easy stuff to do.

Diesels, wrt new emissions standards for nitrogen oxides and particulates, have been a real headache for engineers. If those nitrogen compounds are formed at temps above 1200 deg. F., and the fuel doesn’t ignite efficiently except at combustion chamber temps above that point, then the problem has to be solved at the exhaust gas end of the process, and that means expensive particulate traps, reduction catalysis, and exhaust gas recirculation schemes and/or NOx adsorbers and urea injection (to reduce NOx to ammonia). It may also be that with the emission systems running full-time, they would not meet the EPA’s standards for component lifetimes and couldn’t be certified in the U.S. That would be a driving reason for creating the scam.

80

The Temporary Name 09.24.15 at 8:56 pm

Zamfir has a very good point.

81

hix 09.24.15 at 9:38 pm

Uh, i dont think its even illegal in the EU. I think i did even read an article suggesting this is widespread month ago. No matter either way the spread betwen real life and standard test performance is increasing a lot accross all manufacturers. Cant help but wunder if this would have been far less of scandal in perception if it had been done by GM.

82

David Margolies 09.24.15 at 10:55 pm

Re: Oldster @ 8: You say “each of the [Hunt] brothers earned billions” but according to the Wikipedia article you linked to, they actually lost 1 billion and later went bankrupt. Milton Friedman (I think) pointed out that trying to corner a market in a commodity metal, like silver or copper, was very difficult as there are hugh reserves in people’s attics (Grandma’s sterling service, etc.) which are pulled into the market by high prices.

83

Kenny 09.24.15 at 11:06 pm

The poof disappearance of Anderson, Enron, and Lehmann was a bit easier than the full disappearance of Volkswagen would be. It’s relatively easy to repurpose a bunch of office buildings and a bunch of white collar bankers/consultants than it is to repurpose a lot of factories and specialized engineers.

84

The Temporary Name 09.24.15 at 11:12 pm

Cant help but wunder if this would have been far less of scandal in perception if it had been done by GM.

It was done by American car-makers in various ways, and the official punishment for such things was survivable, as it will likely be in this case. The unofficial punishment for the foreign provider of a luxury-good-rendered-suddenly-worthless in resale value will be interesting to see.

85

christian_h 09.24.15 at 11:34 pm

I think Zamfir in 72. nails it. It is well-known for example that automakers everywhere “game” mileage standards. Often in perfectly legal ways – e.g. by allowing the driver to choose between various programs including one called something like “green” or “eco” or whatever that they expect is almost never going to be used but that they can use in their testing to establish some amazing mileage for their product. So I’m thinking the reason nobody at VW blew the whistle on this is because nobody thought there was anything to blow the whistle on.

Then again I learned from the paper of record that this is somehow about German national character. Or something.

86

bianca steele 09.24.15 at 11:46 pm

In the software, it sounds like, you’d need to get a bunch of pieces working together: the parameters that control the engine and thus emissions, the ability to switch those parameters to a different set at will, the specific switch-throwing to “low emissions”, and the ability to link that to a situation that indicates the car’s being tested. The various sets of parameters themselves are probably designed by someone who doesn’t touch code (Zamfir’s engine engineers), and turned into computer-usable math by someone who may or may not touch code. Someone had to test all this. Someone presumably stood downwind of one of these cars once or twice.

I wouldn’t be surprised if the emissions came out fine in the lab, and only wrong in a real car.

87

Bill Benzon 09.24.15 at 11:46 pm

The NYTimes says such a scandal was all but inevitable:

“The governance of Volkswagen was a breeding ground for scandal,” said Charles M. Elson, professor of finance and director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “It was an accident waiting to happen.”

http://www.nytimes.com/2015/09/25/business/international/problems-at-volkswagen-start-in-the-boardroom.html?hp&action=click&pgtype=Homepage&module=second-column-region&region=top-news&WT.nav=top-news&_r=0

88

christian_h 09.24.15 at 11:52 pm

Yes that is at least the second incredibly strange article in the Times about this: it claims such a scandal was inevitable specifically at VW because… wait for it… organised labour has so much influence on the company’s board and therefore decisions aren’t driven purely by profits but also by employment (read: political) concerns.

89

Tabasco 09.24.15 at 11:54 pm

The NYT says Volkswagen’s culture is less than optimal, for example

One measure of [former autocratic Chairman] Mr. Piëch’s influence: In 2012, shareholders elected his fourth wife, Ursula, a former kindergarten teacher who had been the Piëch family’s governess before her marriage to Ferdinand, to the company’s supervisory board.

The case study for business school students around the world is being composed as I write.

90

christian_h 09.24.15 at 11:57 pm

I should add that both the “national character” and “specifically at VW” things are distortions of something real: namely that the auto industry has taken on this weird mystical status in German politics and discourse similar to the financial industry in England or New York, resulting in a “too big to be called on wrongdoing” dynamic.

91

MobiusKlein 09.25.15 at 12:12 am

#61 spot on – no patent, then the ‘invention’ is a scam.

As far as the software process controls, I suspect that in a regulated business, each change put into the master source will be reviewed by other engineers, approved by QA, attached to a documented change request, and possibly subject to random review by a 3rd party.

That’s what we have at my office (money transfer stuff). Hard to believe they have a bunch of cowboy coders at VW. And if they do, then their shoddy practices constitutes willful negligence.

92

Tabasco 09.25.15 at 12:14 am

It’s an ill-wind. All those Syrians refugees were going to paid for by the windfall from Germany’s industrial might. On the other hand, the southern Europeans might get fewer lectures on efficiency and corruption from Schäuble and his acolytes.

93

Pete Moran 09.25.15 at 12:53 am

As an embedded software engineer myself, I can imagine a scenario in which it is possible to create separate software components, whose combined effects might well be what is occuring. The individual programmers would not realise see the final series of control results. It would be difficult, but not impossible.

I think the point is well made in that more than one person who would have had to know or instructed the intent. That by definition is a conspiracy.

94

Sebastian H 09.25.15 at 1:00 am

For a project this big, there is almost certainly a build library for the software in various iterations. I’m sure prosecutors will love that if they can find experts able to interpret it.

95

Belle Waring 09.25.15 at 2:10 am

Ed: because my grandfather was a total bad-ass, he both worked as a spy behind enemy lines AND was Eisenhower’s liaison with the ENIGMA code-breaking results. (First the former, and then the latter). When he was interviewed for the book Ike’s Spies and the author started to ask him about it, he actually started laughing when he described what the Brits had promised to do to him if he ever said word one. I was always curious as to what they could possibly have threatened that he would still give a shit in 1998 or whatever, but I never found out because he NEVER SPOKE TO ANYONE. What the hell did he sign? I call shenanigans on the Bletchley Park angle, and we found out about the Manhattan project pretty fast.

96

js. 09.25.15 at 2:19 am

Zamfir has a very good point.

Agreed! Also, I think Belle’s reasoning is sound, but as other commenters have pointed out, I think contemporary corporations are a different sort of beast. The traditional skepticism about conspiracy theories applied to governments, more or less—when you’re talking about modern corporations, it might be a genuinely different kind of thing. The motivations of the individual actors involved—including, importantly—the motivations for why they took the job in the first place might be vastly different. In ways that matter.

97

Krebby 09.25.15 at 3:24 am

You only need a small number of good-intentioned engineers/managers for this to occur. The tech industry is rife with such misguided indiscretions (leaving a jeep vulnerable to wireless hacking through its entertainment system, for instance, or Lenovo shipping spyware in their laptops). There is no sinister plot. Ttwo levels away in the corporate hierarchy all they hear is “our smart engineers solved the problem”.

98

Bill Benzon 09.25.15 at 4:53 am

Ah, capitalism! The thing about competition is that, while it may stimulate innovation, the easiest way to win a race is to cheat. Of course, capitalists aren’t the only ones who cheat. It’s almost like its human nature, which is why we have built-in cheater detection modules. Or so I’ve heard.

99

Zamfir 09.25.15 at 5:03 am

Here is the interesting statement by BMW:

BMW says:
The BMW Group does not manipulate or rig any emissions tests. We observe the legal requirements in each country and fulfill all local testing requirements.

In other words, our exhaust treatment systems are active whether rolling on the test bench or driving on the road.
/BMW

At the current level of scrutiny, I assume that the statement is literally true. It also leaves room for plenty of cheats and manipulations, as long as it is not the direct detection of a roller bench. Some of their cars have been shown to exceed test values by many times in road tests, at least ballpark similar to VW.

100

Tabasco 09.25.15 at 7:03 am

The thing about competition is that, while it may stimulate innovation, the easiest way to win a race is to cheat.

The VW stock price is down by a third; the cost in fines and legal expenses will be in the tens of billions; some people are going to go to jail, probably for a long time; the company’s reputation is shot to hell; and the technology the company bet on, diesel, is dead meat.

This is a win?

101

SN 09.25.15 at 7:07 am

We have to get to the bottom of it simply for that reason–we have to know how stuff like this happens.

You are assuming they must have known but wouldn’t it be amazing if they’d simply created a culture where everyone worked in harmony to commit a massive fraud like this without talking about it directly?

Also, it could have been a freak accident (unlikely but possible).

But it’s something that would reveal a lot–because it is absolutely challenging to some ways of thinking about how bad things get done collectively. And we need to know how bad things get done collectively because the worst things are generally done collectively.

102

Warren Terra 09.25.15 at 7:19 am

@ #100 Tabasco:

and the technology the company bet on, diesel, is dead meat.

BMW is selling diesels and so far as is currently known is not cheating. Of course, BMW is selling expensive diesels, because BMW sells expensive cars. So while it’s not clear VW’s fraud-enabled vision for the diesel is viable, it’s also not clear diesel is dead.

103

Zamfir 09.25.15 at 7:39 am

Another interesting point is the upcoming Euro6c norm, which updates Euro6 to include road tests. I put a europarliament document below.

As you can see there, everyone involved knows and takes for granted that road tests are a severe addition to the norm – which means they also realize that bench tests paint a misleadingly positive picture.

The introduction date for road tests is in 2017, explicitly to allow manufacturers to replace their dirty models on a normal, non-accelerated timeframe. See page 8.

It reads to me as if regulators were implicitly OK with gaming the bench test, as a form of relieve from an otherwise too heavy norm. ‘Too heavy’ as in, they could not find politic support for that norm if it had included road tests early on.
They might not have realized how blatantly the test was gamed, but they knew tricks were played.

Matthew Exon at 7 is right that this fits D^2 scandal model. A course of action that insiders started to find normal, and suddenly they are forced to explain it to outsiders. At which point the card house falls down.

http://www.europarl.europa.eu/meetdocs/2014_2019/documents/envi/dv/nec2_land_/nec2_land_en.pdf

104

Bill Benzon 09.25.15 at 7:47 am

@SN, #102: “… they’d simply created a culture where everyone worked in harmony to commit a massive fraud like this without talking about it directly?”

Reminds me of Bridgegate:

https://en.wikipedia.org/wiki/Fort_Lee_lane_closure_scandal

The Fort Lee lane closure scandal, also known as the George Washington Bridge lane closure scandal, Bridgegate,[1][2] or Bridgeghazi, is a U.S. political scandal in which a staff member and political appointees of New Jersey Governor Chris Christie colluded to create traffic jams in Fort Lee, New Jersey by closing lanes at the toll plaza[3][4] to the George Washington Bridge.[5]

The problems began on Monday, September 9, 2013, when two of three customary eastbound toll lanes for a particular local street entrance were closed to that traffic during morning rush hour. Local officials, emergency services, and the public were not notified of the lane closures, which Fort Lee declared a threat to public safety.[6] The resulting back-ups and gridlock on local streets only ended when the two lanes were reopened on Friday, September 13, 2013 by an order from Port Authority Executive Director Patrick Foye (D). He said that the “hasty and ill-informed decision” could have endangered lives and violated federal and state laws.[7]

So, did Gov. Christie himself order those lane closures as political retribution or did he just create an atmosphere in his office where people did such things on their own initiative?

105

Zamfir 09.25.15 at 7:48 am

@Warren, BMW might not (yet?) have been found cheating as blatantly as VW. But some of their vehicles with smaller engines have been road-tested, with similar deviations from the bench test. They have gamed the system almost as hard, but perhaps with less explicit instructions in the software. Same for PSA, or Volvo.

That said, urea injection does seem to work better in real life, and everyone was switching to that anyway. Question is, does it work good enough for renewed levels of scrutiny?

106

AlisonP 09.25.15 at 7:50 am

This is a win?

Clearly not, but if those who do not cheat are quickly eliminated, while those who do cheat face the risk of catastrophic elimination, then the pressure is entirely towards cheating.

And as somebody said above, the senior people who procure the ‘cheating’ (perhaps tacitly) have the opportunity to reap the reward and move out of range of the danger.

I have said ‘if’ but it seems clear to me that those are indeed the circumstances. Not only in the auto industry but in much of our culture. I sometimes wonder if we each in our bubble know the corner-cutting and target-massaging that goes on within our own workplace. But keep it to ourselves.

107

deiseach 09.25.15 at 8:25 am

@Bill Benzon

So, did Gov. Christie himself order those lane closures as political retribution or did he just create an atmosphere in his office where people did such things on their own initiative?

Working towards the Führer?

108

maidhc 09.25.15 at 9:18 am

I can see it requiring only a small number of people. All the operating modes could be legitimate. The engine could be run without emission controls for factory testing or other purposes not involving actual driving. Then the change to what mode the controller is in at what time is subtle and could be non-obvious. As others have pointed out, software design is fairly compartmentalized. Sneaking in tweaks at the interface level could be not very obvious. Most people would just be concerned with “Does my part pass the acceptance test?”

I find it unlikely that a lowly engineer would put it in on their own behalf though. There has to have been approval up some levels of management.

109

Alex SL 09.25.15 at 9:47 am

ZM,

I wouldn’t mind switching to a pretty much car-free economy, personally. But unless I misunderstand you you are talking about wiping out, from one day to the next, the economic basis of one of the largest federal states of Germany … in an unprecedented move given that all previous comparable cases ended with a slap on the wrist. Again, I don’t like all the cars on the road either, but how is that fair? And how is it remotely realistic from a political perspective?

The solution to a company doing something wrong can’t be to give it a slap on the wrist while those responsible walk free. But it can’t be to destroy the company and thus the livelihoods of thousands of innocent employees, of tens of thousands of their family members, of hundreds of thousands of their suppliers, retailers, etc., in short the economy of an entire region, either. The only solution that is fair and works is if you identify the people who were individually responsible and throw the book at them.

110

Laie 09.25.15 at 10:41 am

Alex SL,

Neither the factory nor the workers are going to vanish from the face of the earth even if VW is dissolved. I can imagine a scenario where the whole shebang is bought by someone else and for the most part just keeps going. The new investors probably wouldn’t want to repeat their predecessors’ mistake, though.

Other than that, I’d like to direct everybody’s attention to Matthew Exon above (#7). I think he’s got it right.

Also Zamfir (#103): “road tests are a severe addition to the norm […] bench tests paint a misleadingly positive picture.” Here in Germany everybody knows that this is the case. We don’t expect that real-use consumption or emissions will be similar to those from a controlled test setup. However, we do expect that these tests are qualitatively correct, that is, that they will give a good indication of which model is better or worse.

That VW has tuned their cars to do especially well under test conditions is par for the course. The assumption is that everybody is doing it. What makes it criminal is that these particular optimizations do not carry over into actual use.

111

ZM 09.25.15 at 10:42 am

Alex SL,

My opinion was formed by the article I mentioned. I found another article that quoted an expert saying that with driverless cars we would only need 10% of the current amount of cars, so we don’t need so many car companies any more.

Germany has a very good economy, so no doubt they will be able to manage the demise of VW.

I think it is worse when companies are allowed to continue when they have done something wrong, like the banks that were too big to fail.

I suppose if you identified all the people who did the wrong thing and prosecute them that would sort of work — except if this is a conspiracy it is probably going to be difficult to identify who did what as the company would not have kept proper records of this wrong doing.

112

James Wimberley 09.25.15 at 11:09 am

I support the Becket theory. Winterkorn, who was board member for technical development from 2000, demanded results. He got them. Perhaps he didn’t press much as to exactly how; perhaps as a thorough German, and an engineer himself who’d worked hands-on at Bosch, he did. Either way, he is probably consulting the list of Caribbean islands that don’t have extradition treaties with the USA. Is that safe enough? I can imagine President Trump extracting Winterkorn from Anguilla or wherever with SEALs just to show it can be done.

113

oldster 09.25.15 at 11:21 am

I hope President Trump arrests Winterkorn in Anguilla just after Angela Merkel’s picked squad of Bundespolizei has arrested Dick Cheney in Wyoming and dragged him to the Hague.

But in fact, Winterkorn will not suffer any more than Cheney will. News reports say that he is in line to leave VW with a severance package worth about $67 million US. And if a lot of workers on the assembly line lose their jobs when VW sales plummet, what does that matter to him? It’s simply capitalism at work.

114

James Wimberley 09.25.15 at 11:34 am

PS: Kevin Drum’s rough estimate from published information of the world total of excess deaths caused by VW’s scam is 3,700. Mine is between 1,450 and 5,800. We used different back-of-an-envelope methods, so our agreement raises the confidence that we are in the right ballpark. It needs to be redone professionally of course.

115

James Wimberley 09.25.15 at 11:40 am

Oldster #113: The relevant German unit of small hard guys in balaclavas is the GSG-9. They might be able to pull it off. Skorzeny did.

116

oldster 09.25.15 at 12:20 pm

Are they legally required to be small? Like, Tom Cruise small? I mean, I can see how that could be handy for some situations. But maybe not all?

117

Niall McAuley 09.25.15 at 12:57 pm

I’d guess that the competitions engine management systems (petrol and diesel) all have logic in them which detects test-like conditions and optimizes emissions for those conditions, and detect everyday driving and optimize power or economy.

VW’s crime was explicitly detecting the test, rather than always going to emissions mode in all test-like conditions.

118

Collin Street 09.25.15 at 1:56 pm

But unless I misunderstand you you are talking about wiping out, from one day to the next, the economic basis of one of the largest federal states of Germany

Kill both your parents and throw yourself on the mercy of the court as an orphan.

But look. The core of an automotive company is the design team and the branding, everything else you can contract. And the branding’s gone to shit and the design team have just demonstrated that as a going concern they’re either corrupt or incompetent. There’s no car company left to save. It’s dead, it just takes a while for the twitching to stop. Best thing to do is to start salvaging organs before they start to fail: wind up the company, shut down the design bureaux and release the staff, sell the factories before the skills fade.

I mean, you can fuck around for a couple of years, but it’s not going to improve things.

119

Layman 09.25.15 at 2:49 pm

“PS: it’s uncanny to see another Layman.”

I contain multitudes.

“This is a win?”

Surely they thought they wouldn’t get caught, in which case yes, selling 11 million cars you would not otherwise have been able to sell is a big win. Bonuses all ’round!

120

ragweed 09.25.15 at 5:07 pm

I response to the question of whether this was a win, from a finance-theory perspective, it is still a win. Remember in that world, the sole purpose of the company is to increase shareholder value for the investors. But a rational investor is expected to have a diversified portfolio, so a loss from one investment is OK, so long as the overall risk-adjusted return is maximized. One of the concerns in corporate governance is the underinvestment problem, where managers forgo risky but value-adding projects because they are unwilling to risk the survival of the firm, (and their jobs). Shareholders would prefer they take the higher risk project, so long as the risk adjusted NPV is positive.

And, yes, this is basic MBA finance 101 stuff. Scary.

This is straight-up

121

Omega Centauri 09.25.15 at 5:29 pm

I’m with NuckJ @12 (possibly others I don’t have the time to read more).
The engineers could be teasked with the strictly technical tasks, generate software with the following easily selected capabilities -presumably most are only for testing/development. A few easy to flip software switches are then available to management, and the lower level people who wrote the actual software need not know what settings they actually selected.

122

Marshall 09.25.15 at 6:29 pm

Plume: (They almost always do [get away with it].)

That’s speculation: the sample we have is severely biased. Anyway the social goal here is to have less of this shit, so the useful question is, was the decision (typical of many decisions to break the rules and make a profit, with atrocious downsides), taken at whatever level (at the lab bench or at the board meeting) … was it decided in the rational expectation of not being caught? It seems sufficient to assume the decision-maker(s) were already caught, and it was a choice among rules to be broken, given the pieces readily to hand. Having been a 12-yo boy myself, I understand the panicky feeling that says “cover it up!!” Resisting the more constructive thought of getting Dad involved, which is understandable if that’s likely to be painful. But here Dad doesn’t care about anything except getting the job done, “who will rid me &c” indeed. So what we need is better dads.

123

Bloix 09.25.15 at 7:48 pm

The NYT business section today has an interesting article on the VW corporate culture that allowed this to happen:

“That such a thing could happen at Volkswagen, Germany’s largest company and the world’s largest automaker by sales — 202.5 billion euros last year — has mystified consumers and regulators around the world. But given Volkswagen’s history, culture and corporate structure, the real mystery may be why something like this didn’t happen sooner.”

http://www.nytimes.com/2015/09/25/business/international/problems-at-volkswagen-start-in-the-boardroom.html?ref=business

124

the wolfman 09.25.15 at 8:11 pm

Currently (9/25, 4:08PM EDT) if you google the following phrase,

engine sizes jetta tdi

The 4th link to come up is

VW Features – TDI Clean Diesel | Volkswagen
http://www.vw.com/features/clean-diesel/
VW offers a TDI clean diesel engine to ensure amazing fuel efficiency. … GOLF JETTA Passat Beetle TOUAREG. 2015 Golf SportWagen. With an incredible range of up to 567 highway miles on one tank of fuel,11 a 2.0L turbocharged engine, …

I recommend going to this url and, if asked (as I was), entering a zip code. Much hilarity will ensue.

125

Yoyo 09.25.15 at 9:06 pm

I don’t think the excuse that it was an “internal test mode” washes. That would only need an on/off switch that could be flipped from the external control computer. What we know indicates is that the software had test-detection built in, which requires that you code in parameters that would imply the car is undergoing a regulatory test.

126

phenomenal cat 09.25.15 at 9:18 pm

” I response to the question of whether this was a win, from a finance-theory perspective, it is still a win. Remember in that world, the sole purpose of the company is to increase shareholder value for the investors. But a rational investor is expected to have a diversified portfolio, so a loss from one investment is OK, so long as the overall risk-adjusted return is maximized. One of the concerns in corporate governance is the underinvestment problem, where managers forgo risky but value-adding projects because they are unwilling to risk the survival of the firm, (and their jobs). Shareholders would prefer they take the higher risk project, so long as the risk adjusted NPV is positive.

And, yes, this is basic MBA finance 101 stuff. Scary.

This is straight-up.” ragweed @ 120

I’m going to be real eloquent here, and note that this stuff needs to fuck off and die

127

Alex SL 09.25.15 at 9:54 pm

ZM,

So what do you do if all major banks have done something wrong? Destroy the world economy and start again from the neolithic? And extending the logic, do you destroy an entire country whenever its government has committed a crime?

I am afraid that your vision is just the flip side of certain US judges’ view that corporations are persons. They aren’t, and consequently they shouldn’t be treated like persons. Instead they are made up of persons, and only some of those persons have responsibility for any particular thing that happens.

128

ragweed 09.25.15 at 9:58 pm

Yea, I was pretty appalled by that little aspect of finance theory. In fairness it is not usually applied to criminal activity – more to over-cautiousness in companies that have a large debt overhang – but I think the application to legally questionable behavior is obvious. The shareholder can only loose their shares, after all.

129

anon 09.25.15 at 10:04 pm

This is due to the method used to check exhaust emissions.

When Illinois started testing years ago a measurement device on a probe was physically inserted into the cars exhaust pipe.

The last few times our Subaru was tested a literal black box was place on top of the car’s hood.

It is hard to understand why emissions testing by the EPA is no longer a physical process. Checking thousands of cars a month by the State of Illinois is one thing.

Exhaustively checking a dozen or so test cars at the actual point of emissions
should not be that daunting a task. Of course it is being done by a government agency.
Maybe that explains why stuff like this is allowed to happen.

130

Collin Street 09.25.15 at 10:59 pm

> I’m going to be real eloquent here, and note that this stuff needs to fuck off and die

The government has a mechanism for identifying and tracking people who have a history of making ill-advised decisions under pressure that place others at danger, but it’s not used as much as it could be because having a criminal record carries excessive social consequences.

131

Warren Terra 09.25.15 at 11:41 pm

@ The Wolfman, #125
VW has apparently 404’d the Clean Diesel page you tried to link. Their homepage has nothing obviously about diesel or fuel efficiency – but also has no other references to this debacle, such as a statement of apology on the home page.

It does feature that the Golf family of vehicles is the 2015 Motor Trend Car Of The Year. This of course includes the now disastrous Golf GDI diesel. I wonder if they will have to forfeit this and other honors, and stop using them in advertisements?

132

The Temporary Name 09.25.15 at 11:44 pm

133

the wolfman 09.26.15 at 2:31 am

Warren: Yeah, that was the point. That the VW clean diesel page can’t be found. I thought it was funny. I’m grateful to The Temporary Name (is this a temporary pseudonym?) for having tracked down the original.

134

hix 09.26.15 at 11:09 am

Still a bit lost what exactly they did (or did this time). Did they detect different parts of the test setup and optimice for particulate emissions while those where tested seperate, just to move on to optimum mileage settings when fuel consumption was tested ?

Really getting curious what kind of legal consequences there will be or wont be in the EU now.

135

Bloix 09.26.15 at 1:38 pm

#126-
“Remember in that world, the sole purpose of the company is to increase shareholder value for the investors. “

Not so. VW is managed under the German system known as Mitbestimmung (co-determination). This means that VW’s unions have equal representation on the powerful “supervisory board” that oversees the “board of managers.” In addition, the German state of Lower Saxony owns 20% of VW stock and has corresponding representation on the board. The remaining seats are appointed, effectively, by the Piech family, which owns a controlling block of shares through a foundation.

The result is that VW does not try to maximize value for shareholders. It tries to maximize jobs and sales. As the NYT article I linked to above points out, VW has 1.75 times the number of employees that Toyota has, but produces only about 10% more cars.

Maximizing jobs is an obvious union goal. Maximizing sales has the benefit of increasing the number of jobs at suppliers, whose employees are also union members, and many of which are also in Lower Saxony – so that’s something the union and government board members care about. And the Piech family doesn’t need to maximize wealth, but its leading members get a lot of prestige in Germany by making a German company the largest car company in the world. So the goal of maximizing sales is one that all parties to the co-determination governance could share.

The goal of maximizing sales contributed to this scandal because VW made the decision that it had to make big inroads into the North American market at any cost, because otherwise it could not grow to be the largest car company in the world. That was the goal, not profit maximization.

136

Stephen 09.26.15 at 5:02 pm

Alex SL: it seems that ZM is in favour of exiling a large part of the population of London for the eco-crime of not producing enough food to support themselves, but importing food instead. That being so, I don’t suppose the devastation of the economy of Niedersachsen would bother her too much.

137

hix 09.26.15 at 7:34 pm

Looks like VW hardly made any money from cheating that way. Just a little more consumer comfort due to shorter maintenance intervalls or some money saved on a larger tanks for that additive. Maybe they severly misjuged how large the fine would be if they get caught, maybe based on the prior similar cases with Trucks?

Whistleblowing is not exactly encouraged by German employment law, but it still seems all rather irrational.

138

Warren Terra 09.26.15 at 8:28 pm

@ hix, #134

Still a bit lost what exactly they did (or did this time). Did they detect different parts of the test setup and optimice for particulate emissions while those where tested seperate, just to move on to optimum mileage settings when fuel consumption was tested ?

The software controlling the engine could let it run in a manner that minimized particulate/NO emissions, or could let it run in a manner that maximized fuel efficiency, or could run it for more responsive acceleration, so the driver would feel more powerful and enjoy themselves more. But none of these three was fully compatible with the other two, especially the emissions controls.

So: VW set the engine to a default driving mode that would make the customer feel happy. It would be fairly responsive to the gas pedal, so they’d enjoy driving the car. And it would have good fuel efficiency, so they’d feel satisfied at the pump. And VW achieved all this for the driver by making the car spew waste like a 19th century locomotive – which is of course bad, but which the driver wouldn’t detect.

This makes for a car that won’t be allowed on the road; it would fail emissions testing so hard it might affect results three cars over. So, VW rigged the car to detect emissions testing, and to run the engine differently during such tests. During an emissions test the car is incredibly clean on emissions – but during the test it’s not capable of the rapid acceleration and the fuel efficiency that endeared it to its driver. Ten minutes after it fools the emissions test, the car is once again a smooth efficient driving machine with no emissions controls.

139

shah8 09.27.15 at 2:47 am

I think a certain thing needs to be emphasized here:

The actual issue with the cheating had to do with just how much cheating it was. Regulators can be pressured on a little shave here and there, but VW’s differential was both qualitatively (as in no magical pollution control w/o urea solution engine) and quantitative (as in, if there are enough of those, in realistic numbers, in Los Angeles or Salt Lake City, then they are very real air hazards that even the rich suffer).

The idea that cheating is bad, just so, is simply everyone rubbing salt in Germany’s public face for past slights, real and/or imagined.

140

ZM 09.27.15 at 5:11 am

Alex SL,

“ZM, So what do you do if all major banks have done something wrong? Destroy the world economy and start again from the neolithic? And extending the logic, do you destroy an entire country whenever its government has committed a crime?”

I am not sure if it was all the banks in America that did something wrong or just some of them?

If it was just some of the banks in America then you can dissolve the banks that did something wrong and sell the assets to other banks that agree to follow the law.

If it was all the banks in America — then I don’t think you have the capacity to run banks properly and as this affected not just America but the whole world with the GFC then America can dissolve all of its banks and sell the assets to banks in other companies.

I am not saying to to destroy all the people in the company — the wrongdoers can be charged with law breaking and the company can be dissolved. You cannot dissolve countries, you can dissolve governments — so if a government does something wrong the government can be dissolved. This works best if the legal body with the authority to dissolve the government lives in another country — like the Queen living in England dissolved the Australian government in the 1970s.

“I am afraid that your vision is just the flip side of certain US judges’ view that corporations are persons. They aren’t, and consequently they shouldn’t be treated like persons. Instead they are made up of persons, and only some of those persons have responsibility for any particular thing that happens.””

Corporations are not persons here in Australia so that is irrelevant. If VW was a person you could send it all to gaol — as it is not a person you send the wrongdoers to gaol where possible and dissolve the corporation.

As I said Germany has a strong economy and will not doubt be able to handle the dissolution of VW, and we don’t need so many car companies now due to driverless vehicles and because mass transport and active transport are better alternatives than too many cars like we have at present.

141

ZM 09.27.15 at 5:18 am

Stephen,

“Alex SL: it seems that ZM is in favour of exiling a large part of the population of London for the eco-crime of not producing enough food to support themselves, but importing food instead. That being so, I don’t suppose the devastation of the economy of Niedersachsen would bother her too much.”

I have already had this argument with you in the past I believe.

I have never said that I am in favour of exiling a large part of the population of London as they consume too many resources.

What I am in favour of is the population of London decreasing their consumption of resources and producing more resources in London — such as by increasing allotment gardens which provided a lot of fruit and vegetables in wartime and the immediate post-war period. They can also have rain tanks to catch water, and have renewable energy technology to produce energy, and develop a circular economy to recycle all the metals so they don’t use metals from other countries too.

142

Tabasco 09.27.15 at 9:08 am

ZM, it is remarkably generous of you to permit the residents of London to have their own rain tanks. Your perch from 12000 miles away in Australia must give you remarkable clarity. Before sealing the deal, though, have you considered asking Londoners whether your prescription for them is what they want?

143

Val 09.27.15 at 9:18 am

@142
Oh for heavens sake, why don’t you engage with what ZM’s saying? Oooh, 12000 miles away in Australia, must be irrelevant.

CT has good authors but lord some of the commenters are boring.

144

ZM 09.27.15 at 10:04 am

Tabasco,

“Before sealing the deal, though, have you considered asking Londoners whether your prescription for them is what they want?”

I think it is very unfair that Londoners get to consume as many resources as the whole land of the United Kingdom can produce. So since this inequity is what happens when Londoners are left to their own devices to decide what they want (after they stopped being able to have colonies except for The Falklands Islands and possibly some other small places), then I think I will just continue to recommend policies for London from here in Australia.

If you live in London you can try to get Londoners to consider the impacts of their consumption and thus change what they want — my sphere of influence on Londoners is constrained to recommending policy for them on comments threads here.

145

Tabasco 09.27.15 at 12:27 pm

ZM, good luck with convincing Londoners to take their living standards back to what they were in the war and its aftermath, 70 years ago. I don’t think they’ll buy it, but I might have underestimated your powers of persuasion.

146

ZM 09.27.15 at 1:07 pm

Many thanks. I asked an eminent Australian economist about a sustainable fair economy last year, and he said an economy based on healthcare and books, especially digital books to save trees, should be very pleasant and sustainable.

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hix 09.27.15 at 3:28 pm

Thanks for the explanation, that way it is indead a new quality of cheating that goes beyond the more cynical suggestions ive come accross before. Just hope this is limited to vw. Theres been an article that suggests Bosch has “warned“ vw about using that software in a way that rather sounds like a suggestion to use supplied software to cheat with legal coverage and bosch supplies pretty much every diesel manufacturer.

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Bloix 09.27.15 at 4:13 pm

Vox has some information I wasn’t aware of: this isn’t the first example of this fraud. Truck manufacturers did it 17 years ago:

“the EPA caught a number of truck manufacturers, including Caterpillar and Volvo, doing something similar back in 1998 — programming their diesel trucks to emit fewer pollutants in lab tests than they did on the road.”

http://www.vox.com/2015/9/21/9365667/volkswagen-clean-diesel-recall-passenger-cars

So EPA knew that it was possible and that even the biggest, most reputable companies would do it, but they didn’t modify the tests. Another nobodycoodanoed moment.

What happened to the companies? – not just Caterpillar and Volvo, but also Navistar, Renault, Detroit Diesel (“Freightliner” brand, owned by Daimler), Cummins Engine, and Mack Trucks, 95% of the US truck market, a true global conspiracy. They paid $83 million in civil fines and promised not to do it again. No criminal prosecution and no recall.

No wonder VW thought they could get away with it.

http://www.justice.gov/enrd/diesel-engines

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William Berry 09.28.15 at 5:13 pm

@Val and ZM: You guys rock.

Don’t let the neo-lib old-boys’ club of (some of) the commenters here get you down.*

*Not that there is any danger of that, mind you.

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Stephen 09.28.15 at 6:52 pm

ZM

We have indeed had this argument in the past. I have tried, using indisputable figures for the area of London and the population of London, to show you that there is no plausible figure for crop yields that would allow Londoners to grow enough food for themselves. I have obviously failed, and I have no hope of future success.

What I may be able to do, though, is to get you to question your underlying belief that each area should support itself from its own resources without relying on resources from outside.

Consider: I am at the moment drinking some coffee, and have just eaten an orange, and am wearing some cotton clothes. All of these come from crops which cannot be grown outdoors in our cool climate (and can only be grown indoors in expensively-heated greenhouses which I think you would find environmentally objectionable).

So in your ideal eco-friendly state, should people in the UK be forbidden coffee (and tea, and chocolate, and most kinds of wine) and oranges (and lemons, grapefruit, bananas, mangoes, ginger, pepper, chillies, nutmeg, cloves, cardamon, whatever) and made to dress only in wool, linen, hempen canvas and leather? From where do you expect to get the electoral mandate to do that?

Furthermore: you have been accessing this site through some kind of PC/laptop/tablet or whatever. Was this manufactured entirely in Australia, using only Australian resources, or have you too been guilty of taking resources from abroad?

Please do think about these things before replying.

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ZM 09.29.15 at 2:38 am

Stephen,

I have no difficulty in believing that the population of London is unable to grow sufficient food to feed themselves within the city boundaries. I never suggested they could do this. What I said was that they should grow a greater proportion of their food supplies in London with allotment gardens and having fruit trees and herbs on the grass beside the footpaths and so on — once you get electric cars the pollution even on heavy traffic roads won’t spoil the fruit.

” get you to question your underlying belief that each area should support itself from its own resources without relying on resources from outside.”

I do not assert this either. This is as it would be unfair because a country like Australia with a lot of land and relatively small population has a lot of resources, but I think somewhere like Singapore needs trade due to being overpopulated from colonialism and 20th C mobility like London.

You have to be historic and take into consideration the facts.

I hope you enjoyed your orange and coffee, I guess its a pleasantly warm Autumn day over there if you’re wearing a cotton outfit.

We have a different problem with imports of oranges — we can grow oranges in Australia but the imports are often cheaper so you see orange orchards bulldozing their trees which is a great waste in my view. Although where I live we have stonefruit orchards not orange orchards — but the federal government a few years ago decided to let New Zealand apples in despite the risk of fireblight, and it is not good for the orchardists at all and if the orchards are subdivided for housing it will be a misuse of good agricultural land.

I am sure there are plenty of nice things you can grow in England, like elderberries and damson plums and currants, and linen is a very elegant fabric if you either enjoy ironing or don’t mind crinkles.

Australia does not manufacture much electrical goods anymore, as that sort of manufacturing got offshored some time ago. We do have a lot of metals that we mine and export that might be used in electrical goods.

Anyway — my point was not that Londoners should be forbidden from ever trading with any other country again due to past wrongs and over-consumption.

My point was that due to the nature of the world’s economy being interconnected and globalised we should accept re-distribution between nations to reduce inequality, in the same way as we accept re-distribution within nations to reduce inequality.

This being the case, people in advanced economies should reduce their consumption to responsible levels.

I do not need an electoral mandate from Londoners since they already voted in this Conservative government with David Cameron and a few days ago UK’s Conservative government signed up to fully implement the post-2015 development agenda by 2030.

One thing the government — who you already elected so they already have an electoral mandate — signed up the UK to do was move to sustainable consumption and production. So everyone in England has fortunately already agreed to reduce their consumption to sustainable levels in the next 15 years — happily it does not rely on my powers of persuasion from here in Australia.

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Tracy Lightcap 09.29.15 at 9:20 pm

I have just one thing to add here: VW has ambitions.

My wife’s law firm recently hired one of the main corporate counsels for Toyota. You know, the biggest car company in the world. In their first conversation, she asked him what company Toyota thought was their biggest threat. She said his answer came without a pause: “Volkswagen.” He said they had a good product, a world-wide production and distribution system, good engineers, a management willing to price cars aggressively, and that “… their quality control gets better every year.”

If the folks at Toyota recognized this, so would the management at VW. They want to be number one and they are willing to take the steps to do it. Having a small group of engineers – and I agree that this didn’t need to be any company-wide conspiracy – who could advance that program, knowing that sooner or later tech would solve the emission problem for all diesel engines by superannuating them for electric ones, is all it would have taken. I doubt the top management had anything to do with the details; they set the goals and the manufacturing process took care of the rest.

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max 09.30.15 at 3:19 am

(I didn’t see this post until today. Sorry!)

126: I don’t think the excuse that it was an “internal test mode” washes. That would only need an on/off switch that could be flipped from the external control computer. What we know indicates is that the software had test-detection built in, which requires that you code in parameters that would imply the car is undergoing a regulatory test.

Nope. I figured out what they did.

The trick is that all the sensors in a car are basically very simple. The oxygen sensor, for example, simply detects the amount of oxygen in the exhaust pipe, just downdraft from the exhaust headers. It does not know nor care about any other chemical component in the exhaust. And there aren’t that many sensors controlling any given engine. In platonic ideal form, a modern car has: a crank sensor, cam sensor, oxygen sensor, voltage sensor, mass air flow sensor, and a few more perhaps depending on the car. Those are all the sensors needed to control the engine proper, which effectively controls the exhaust output.

The software to track those sensors and make the data available to the master program were all written long ago and only slightly updated from time to time. Otherwise, they’d be risking the proliferation of bugs which would cause warranty (and safety) problems.

The master engine control, in turn, has (correctly!) lots of modes to adapt to different driving conditions, not to mention a startup mode which is heavily polluting. Adding an extra mode would be easy peasy and would simply appear to be a different driving mode.

Emissions testing is done in place, with the tires on rollers, so all they’d need to do is detect the situation that exists when the tires are going round and round but the car itself isn’t moving. For that you’d need an accelerometer. Nominally, adding an accelerometer would be expensive and suspicious, but if you already had one, you’d be all set. Just sniff for the full stop condition from the accelerometer but acceleration on the engine and say, hey, we need to be in mode X.

Airbag systems have built-in accelerometers. Airbag systems have to have them, or otherwise there would be no way to detect an accident occurring and trigger the airbag explosion. If the airbags are wired to communicate their actual positional data to the main computer for other reasons (detecting an ongoing accident and attempting to maximize safety by shutting the car down), then the master system already has the positional data.

The master system just looks for engine acceleration with no actual movement of the entire car and says, boom, let’s switch into Mode X, clean mode. (That particular mode would actually be helpful in certain weird circumstances: the front bumper was up against a brick wall, say, and someone stomped on the accelerator. Or the parking and standard brakes were all fully engage. In that instance, the computer would just radically reduce horsepower output, minimizing damage both to the car and the wall. (Or the brakes.) Aand tah dah!, distinctly reducing the amount of pollutants.)

To add the mode in its entirety would probably take 500 lines of assembler, tops, and far fewer lines of high-level code. To tweak an existing safety mode would take far less. Then the programmers would have just needed the running parameters for that mode to minimize pollution.

Nothing much to it, and no switch needed. As soon as the accelerometers sniff significant forward movement a mode change is engaged, so actual driving performance is never impacted.

No big conspiracy needed – this is just a couple of programmers, the manager in charge of the coders, and the diesel car VP.

max
[‘They’re probably all doing it, because they’ve already done almost all the work, and not being able to deliver the numbers needed to roll out new models would cost some people their jobs.’]

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Manta 09.30.15 at 3:25 pm

The company may go kaputt, but the managers got rich(er).

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Shirley0401 09.30.15 at 6:16 pm

ZM @151
People behaving as if they have a responsibility to other humans and/or the ecosystem that supports life might seem nice enough in theory, but do you realize this might mean fewer and/or more expensive avocados for many parts of the world?

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